Best Buy Rising: Vows Price Matching; Barclays, Stifel Up to Buy

By Tiernan Ray

Shares of Best Buy (BBY) are up 57 cents, or 3.4%, at $17.44, after the company got two upgrades, from Barclays Capital’s Alan Rifkin to Overweight from Equal Weight, and from Stifel Nicolaus’s David Schick, from Hold to Buy.

Also lifting shares, the company has said it will “make permanent its holiday price-matching policy” with Amazon.com (AMZN) and others, as reported today by Chris Burritt. That vow on the part of the company was being touted by folks on CNBC today as a means for Best Buy to end the phenomenon of “show rooming,” where by people wander through Best Buy, figure out what they want, and then go buy it online at Amazon or elsewhere, for less money.

Schick, setting a $23 price target, writes that 2013 is a “transitional year,” and that ” in the nearer term this call is about a much clearer plan & dialogue thereof with the Street – with a stronger belief in $2-3 EPS stream than at any time since 2009.”

Ticking off the list of things he likes, Schick notes “much-improved management” by CEO Hubert Joly and CFO Sharon McCollam:

Sharon McCollam’s thought process is of note (well respected by the Street, moving to Minneapolis in winter!). Hubert Joly – less well known by the Street – is making tough decisions and stressing simple, measurable financial goals and operational accountability. This is no longer the vagaries of customer centricity and 7% OM in ’07. Maybe the Super Bowl ads say it best. After an incoherent Justin Bieber / Ozzy Osborne ad a year ago, Best Buy ran an Amy Poehler ad during the Super Bowl in 2013 – this year they targeted the household members who actually have questions about products and the money to spend on them. This management shift is amongst the closest to 180 degrees as we’ve ever seen. It’s worth remembering that this likely means some noise in the near-term, it did for Blake’s first year at the helm at HD. Management turnarounds can get the benefit of improved valuation and estimates (over time).

He also thinks that the electronics landscape is becoming easier for the company given that sales are brooding out from just Apple‘s (AAPL) wares to greater sales from other vendors, including Google‘s (GOOG) Android and Microsoft‘s (MSFT) Windows Phone 8-based smartphones:

We believe the Android platform continues to gain momentum as AAPL trends stabilize. Competition for Apple is very important here – it suggests consumer shopping for alternatives, vendors wanting to make markets (need floor space), and perhaps Apple even needing BBY a little more. We noted vendors at CES providing strong support for the platform and simple applications that iOS devices cannot deliver given the closed platform. Also, our CES visits suggest a mini tech-cycle in smart appliances (with BBY and HGG benefitting). While Windows 8 and Wii-U have seen slow launches so far, newness is still incremental y/y and we expect Windows 8 momentum to build over time. The video game industry is having its first console refresh in roughly 7 years (PS4 reportedly to be announced soon) which could drive significant newness in the category.

He also thinks sales tax issues for Amazon.com “continue to ramp in BBY’s favor.” The stock can get to an Ebitda multiple of 3.9 times, he thinks, from 2.9 times currently.

Barclays’s Rifkin, raising his target to $20 from $13, writes that despite “an intensifying group of e-commerce competitors, a challenging real-estate environment, a high operating expense structure, and a weak product cycle,” the risk and reward on the stock are more balanced than in past.

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FEBRUARY 19, 2013 4:45 P.M.

Ed wrote:

Good for Einhorn. Now let's stick it to Apple and their Overpaid, Useless Board, and add Ichan on as a Board Member. F Apple and F Cook. The time has come for real Leadership and Einhorn and Ichan are a start. A new CEO is next.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.